Fidamen

Sortino Ratio Calculator

The Sortino ratio measures risk-adjusted return where downside volatility is treated as the relevant risk. It compares the portfolio's excess return above a user-specified target (Minimum Acceptable Return, MAR) to the downside deviation of returns below that target.

This calculator expects annualized inputs: an annualized mean return, an annualized downside deviation, and the chosen MAR. It returns the Sortino ratio and the annual excess return. Use the observations field to record the number of return points used to produce the annualized figures; this helps evaluate statistical reliability.

Updated Nov 25, 2025QA PASS — golden 25 / edge 120Run golden-edge-2026-01-23

Governance

Record 9359541074d0 • Reviewed by Fidamen Standards Committee

Inputs

Results

Updates as you type

Sortino ratio

1.6

Annual excess return (mean − target)

800.00%

OutputValueUnit
Sortino ratio1.6—
Annual excess return (mean − target)800.00%%
Primary result1.6

Visualization

Methodology

Formula: Sortino ratio = (Rp − MAR) / Downside deviation, where Rp is the portfolio return and MAR is the minimum acceptable return. Downside deviation is the square root of the mean squared negative deviations below MAR (semi-deviation).

This implementation assumes the user supplies annualized mean return and an annualized downside deviation. If you have raw periodic returns (monthly/weekly), annualize both the mean and downside deviation consistently before using this tool.

Statistical and measurement caveats follow best practices for uncertainty and repeatability. For guidance on measurement uncertainty, data handling, and algorithmic accuracy, consult standards such as NIST guidelines on measurement uncertainty and ISO/IEEE best practices for statistical reporting.

Key takeaways

The Sortino ratio isolates downside risk and is useful when upside volatility is not a concern. It complements other measures such as the Sharpe ratio but focuses only on negative deviations from a specified target.

Provide consistently annualized inputs and document the number of observations. Low observation counts increase sampling error; apply caution and consider bootstrap or robust estimation methods for small samples.

Worked examples

Example: mean_return = 10.0, target_return = 2.0, downside_deviation = 6.0 → annual excess return = 8.0%; Sortino = 8.0 / 6.0 = 1.333.

If downside_deviation is very small (close to zero), the Sortino ratio can become extremely large or undefined; verify downside_deviation is positive and review raw returns for outliers or data errors.

F.A.Q.

What input format should I use?

Enter annualized percentages for mean return, target (MAR), and downside deviation. If you have periodic returns, annualize both the mean and the downside deviation with a consistent method before using this calculator.

How is downside deviation different from standard deviation?

Standard deviation measures variability both above and below the mean. Downside deviation (semi-deviation) measures only returns below the MAR or threshold; it penalizes negative outcomes relative to that target.

Can I enter raw return series here?

This simple version requires precomputed annualized mean return and downside deviation. For calculators that accept raw return series and compute annualization and semi-deviation internally, use a tool that supports series inputs or compute the statistics in a spreadsheet first.

How reliable is the Sortino ratio with few observations?

With small sample sizes the estimated mean and downside deviation have higher uncertainty. Document the observation count and consider applying bootstrap confidence intervals or referring to statistical standards for uncertainty estimation.

What if downside deviation is zero?

If downside deviation equals zero the ratio is undefined or infinite. Check for data errors, extremely infrequent negative returns, or a MAR set below all observed returns. Consider alternative risk metrics if downside deviation is not meaningful.

Sources & citations

Further resources

Versioning & Change Control

Audit record (versions, QA runs, reviewer sign-off, and evidence).

Record ID: 9359541074d0

What changed (latest)

v1.0.0 • 2025-11-25 • MINOR

Initial publication and governance baseline.

Why: Published with reviewed formulas, unit definitions, and UX controls.

Public QA status

PASS — golden 25 + edge 120

Last run: 2026-01-23 • Run: golden-edge-2026-01-23

Engine

v1.0.0

Data

Baseline (no external datasets)

Content

v1.0.0

UI

v1.0.0

Governance

Last updated: Nov 25, 2025

Reviewed by: Fidamen Standards Committee (Review board)

Credentials: Internal QA

Risk level: low

Reviewer profile (entity)

Fidamen Standards Committee

Review board

Internal QA

Entity ID: https://fidamen.com/reviewers/fidamen-standards-committee#person

Semantic versioning

  • MAJOR: Calculation outputs can change for the same inputs (formula, rounding policy, assumptions).
  • MINOR: New features or fields that do not change existing outputs for the same inputs.
  • PATCH: Bug fixes, copy edits, or accessibility changes that do not change intended outputs except for previously incorrect cases.

Review protocol

  • Verify formulas and unit definitions against primary standards or datasets.
  • Run golden-case regression suite and edge-case suite.
  • Record reviewer sign-off with credentials and scope.
  • Document assumptions, limitations, and jurisdiction applicability.

Assumptions & limitations

  • Uses exact unit definitions from the Fidamen conversion library.
  • Internal calculations use double precision; display rounding follows the unit's configured decimal places.
  • Not a substitute for calibrated instruments in regulated contexts.
  • Jurisdiction-specific rules may require official guidance.

Change log

v1.0.0 • 2025-11-25 • MINOR

Initial publication and governance baseline.

Why: Published with reviewed formulas, unit definitions, and UX controls.

Areas: engine, content, ui • Reviewer: Fidamen Standards Committee • Entry ID: 201822ef2d5c